Markets Plunge as Trump Ends Iran Ceasefire; Oil Surges 6%

Global markets experienced a sharp downturn, mirroring the worst days of spring, following U.S. President Donald Trump's declaration that a provisional ceasefire with Iran had ended. The announcement immediately sent oil prices soaring, with Brent futures in London climbing over 6% to surpass $78 a barrel. Natural gas prices in Europe also saw a similar surge, nearing $50.

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Just when we thought we could leave geopolitical risk premiums behind... the attacks remind us that this peace agreement is still in process.

Trump made these remarks during a press conference in Ankara, stating his unwillingness to continue negotiations with Tehran, though he acknowledged his negotiators could still engage. This came after U.S. forces completed strikes on more than 80 targets overnight, a response to Iran's alleged aggressive actions against merchant vessels the previous day. These incidents, targeting a Qatari liquefied natural gas carrier and two large oil tankers, marked the most significant day of attacks since a provisional peace agreement took effect in June.

The stock markets reacted violently to the news. Spain's Ibex, initially down 0.5%, accelerated its losses to over 2.3% after Trump's statements. Other European markets also experienced declines of around 2%. The market response followed a familiar pattern seen during times of war: rising oil and gas prices, falling stock markets (with the exception of oil companies like Repsol, which rose 4.5%), and an increase in gold prices and interest rate expectations. U.S. 10-year debt yields rose five basis points, while Italian debt, considered higher risk, increased by ten basis points.

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I think that, in the current situation, brent is still trading at levels that do not reflect some of the continued outbreaks of violence in the Middle East.

"Just when we thought we could leave geopolitical risk premiums behind... the attacks remind us that this peace agreement is still in process," said David Chao, a global markets strategist at Invesco. He noted that Brent crude prices might not fully reflect the ongoing violence in the Middle East. In Asia, the Kospi index in South Korea was dragged down by a consecutive day of losses for Samsung, which fell nearly 7% after disappointing earnings. The Nikkei in Japan shed 1.5%, while the Hang Seng in Hong Kong advanced over 2.5%. Sara Perring of J.P. Morgan commented on a global trend of short-term profit-taking in well-performing long-term investments, particularly in the AI sector.

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Short-term profit-taking in long-term investments with a good long-term performance, especially in the AI sector, seems to be a global dynamic.